Ethics and Public Policy Center Fellow James C. Capretta has a must-read essay on “The Demographics of Social Security” which is sub-titled “Why Entitlement Reform Needs a Fertility Boost.” The essential point is that America is not producing enough kids to produce enough workers to support the welfare state. In brief, there are too many retirees living off too few workers (“As fertility falls, the old-age dependency ratio increases”) and increasing immigration is insufficient.

Changes to programs will also be necessary and Capretta highlights a way in which boosting the number of future workers could be rewarded within the Social Security system itself:

The easiest way to fertility-enhancing reform would be to build directly into the Social Security formula a factor reflecting the value to Social Security of raising an additional future contributor. Like the adjustment in the retirement age, this adjustment for having and raising children could be calculated by the Social Security Administration and adjusted over time as circumstances warranted. The calculation would reflect the additional value to the Social Security of families raising children compared to those that do not. The calculation would reflect average lifetime earnings and benefit payments for families over time, giving appropriate additional benefits to workers who have reared children—the future contributors that the Social Security System must have to survive. Because parents with multiple children would be raising multiple future taxpayers, the calculation would show the expectation of a net gain to Social Security from such a family compared to one without children. That net gain could then be partially shared with the parents during their retirement years in the form of higher monthly benefits.

Capretta makes two key points about the entitlement debate in America (and also Canada, Japan and Western Europe): there is a need for innovative policy solutions and very little will work without an increase in the number of children being born.